Have the rich got richer faster than the poor have become non-poor? A lot really depends on what has happened to wage levels. If they've risen faster for the rich than they have for the poor, this could be one reason. An IMF Working Paper by Petia Topalova uses NSS data and, after making some assumptions, shows that while real wage growth in the post-liberalisation period (1993/94 to 2004/05) has risen faster than in the pre-liberalisation one (1983 to 1993/94) for every group of people, it has risen a lot faster for the upper income groups. So, her conclusion is that while the poor haven't got poorer, the rich have got richer. What caused this? She finds, and this seems intuitive as well, that since growth in the past decade has been higher in the services sector and skills are a lot more important here than in the manufacturing sector, wages of the skilled (generally also the richer) rise faster. In other words, she finds, states which have labour laws to protect the rights of industrial workers have reduced the relative gains to the poor. Other findings, again intuitively obvious, states with higher financial development tend to have less inequality, ditto for states with greater education; surprisingly, there is little correlation between state expenditure in areas like education and health and pro-poor growth "� this could be due to the huge leakages in such expenditure. Makes you wonder a bit about why the poor continue to vote for people who keep them poor.
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